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  A great many factors have conspired to reduce the profitability of consulting firms in recent years, not least of which the general economic downturn in the core consulting markets (US, UK and Germany).
Consulting-Times E-zine
One profitability issue that firms have not had to worry about of late though is the "War for Talent" – and the associated problem of consultant attrition or staff turnover. Essentially the cost of employing a pool of consultants has remained quite stable these last 2-3 years, with pay rises subdued and staff defections relatively modest.

Until now that is.

The latest statistics from indicate a dramatic change is underway in Q1 2004. Just consider the figures for a moment. Job search activity on Top-Consultant is up a staggering 75% quarter-on-quarter, and whilst the site has enjoyed record visitor numbers in the last 2 months, the increase in job search activity is almost all due to an increase in the % of readers looking for a new job rather than the actual increase in readership itself. Put another way – candidates who were not actively looking for a new job 3 months ago are now aggressively seeking out new consulting opportunities.

The drivers for this dramatic shift in candidate activity have been two-fold…

1. Major firms have all begun recruiting again

Firstly, the number of management consultancy career opportunities has rocketed in the last few months. Regular readers will have noticed that a great many of the brand-name consulting firms have initiated major recruitment campaigns this quarter. Arthur D Little, Cap Gemini Ernst & Young, PA Consulting, Ernst & Young, BearingPoint, DiamondCluster, SBI.Razorfish, Celerant Consulting, Proudfoot…

The list could indeed go on. However, input from executive recruitment agencies confirms that this is just the tip of the iceberg. Recruitment firm activity is also reaching a 3 year high and the suggestion is there is now barely a management consulting firm left that has yet to kick-start a major recruitment campaign. All this in anticipation of a surge in consulting business as 2004 unfolds.

Or is it?…

2. Consultants are more inclined to move now than at any time since the dot-com boom

In large part the recruitment frenzy now underway is aimed at meeting the growing demand for consulting firms' services. But Partners and HR managers alike know that there is also a pent-up desire amongst staff to move on. So recruitment campaigns must not only meet the headcount growth targets that Partners have set for the coming year; they must also be strong enough to counter the expected rise in consultant attrition rates in 2004/5.

In an industry where the average period of employment is only 2-4 years, and where strong growth in earnings is considered the norm, consulting firms now accept that the prevailing market conditions are likely to lead to high staff turnover.

"The combination of poor earnings growth and a lack of alternative opportunities have – in the last 2 years – created an environment where many consultants felt they had little choice but to remain where they were, whilst at the same time being frustrated by their earnings growth. With a dramatic rise in consultancy job opportunities, this situation is now bound to come to a head" commented Top-Consultant Director Tony Restell.

As far as the competitive landscape is concerned, this dramatic return to a "War for Talent" scenario means that recruitment & retention strategies will become a key financial performance driver during 2004/5. Having been pushed far down the priority list in recent years, firms will have to quickly reinstate retention strategies, referral programmes and "golden hellos" – as well as reviewing the effectiveness of all their recruitment strategies. Expect 2004 to be a major transition period in this respect.

Further reading: The 2004 Recruitment Channel Report

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